Property Fund Fair Pricing Being Removed

Property Fund Fair Pricing Being Removed.

Legal & General confirmed that it is to remove the fair value price adjustment from its UK commercial property funds.

Many of you will remember that we had already suggested to clients that you should switch out of any commercial property funds immediately following the Brexit result.  Indeed, many clients did so and locked in property fund growth.  Just a matter of a few days or weeks later, many investment companies had imposed a freeze on dealing in their property funds or had adjusted the price down to reflect the fall in value of the underlying property assets in their portfolios.

Pressure had been put on not just the values of the funds but also cash outflows.

The aftershock of the EU referendum result has now passed and many appear to be more confident of the UK’s future.  As a result, property surveyors to property funds appear more confident in valuations and this week we have seen L&G confirm they will be lifting their restrictions and M&G suggested today that they may also follow suit shortly.

Comment

The dealing restrictions e.g. the suspension of trading in property funds or placing a ‘fair value’ price adjustment is a reasonable action to take to protect loyal investors and likewise, removing the same when confidence in the property sector returns appears to be a natural move. 

The weak pound has also made UK residential and commercial real estate more attractive to foreign investors.  We expect more property fund managers to take similar action although, we are still not so sure given the the UK still has not triggered Article 50 and no Brexit negotiations have begun.  It is going to be a long and rocky path over the coming years but equality lot of new opportunities.